This case is before the Authority on a negotiability appeal
filed under section 7105(a)(2)(E) of the Federal Service
Labor-Management Relations Statute (the Statute) and concerns the
negotiability of two provisions of an agreement that were
disapproved by the Agency head under section 7114(c) of the
Statute.

As discussed in greater detail below, the disputed portion of
Provision 1, which establishes the productivity requirements for
particular performance ratings, is nonnegotiable because it
directly interferes with management's rights under section
7106(a)(2)(A) and (B) of the Statute to direct employees and
assign work. Provision 2, which places the terms of the agreement
into effect retroactively, is not inconsistent with section
7114(c) of the Statute and is negotiable.

II. Provision 1

PERFORMANCE:

a. The following ranges established by the
employer will be used to determine the appropriate
performance level for journeyman employees when
OPCON standards are applied.

(1) Satisfactory Rating - 90-94 percent
of standard

(2) Excellent Rating - 95-99 percent of
standard

(3) Outstanding Rating - 100 percent or
greater of standard

b. The following ranges established by the
employer will be used to determine the appropriate
performance level for Payroll Clerk Trainees when
OPCON standards are applied.

TRAINEE LEVEL I

(1) Satisfactory Rating - 50-54 percent
of standard

(2) Excellent Rating - 55-59 percent of
standard

(3) Outstanding Rating - 60 percent or
greater of standard

TRAINEE LEVEL II

(1) Satisfactory Rating - 75-79 percent
of standard

(2) Excellent Rating - 80-84 percent of
standard

(3) Outstanding Rating - 85 percent or
greater of standard

c. The following percentages of base pay will
be given as an incentive based upon the performance
rating assigned. These increases will be effective
the first complete pay period after approval by the
approving authority, but will never be effective
later than 30 calendar days following the end of the
rating period.

(1) Satisfactory Rating - no pay increase

(2) Excellent Rating - 3 percent

(3) Outstanding Rating - 4 percent

d. The cash awards for performance as detailed
in Article XX of existing contract will remain as
is.

[Only sections a. and b. are in dispute.]

A. Positions of the Parties

According to the Agency, this provision applies to
bargaining unit employees, who are mostly payroll clerks,
located at the Central Nonappropriated Fund Payroll
Office (CNPO). The CNPO is responsible for performing
accounting, disbursing, examination and control, payroll
processing, and quality assurance review operations for
the Department of the Army nonappropriated fund system.
The Agency states that the performance of these employees
is measured, for the most part, by preestablished
production goals known as "OPCON Standards." As an
example of a typical "OPCON Standard," the Agency states
that an employee might be required to file documents at a
rate of 113.64 per hour in order to reach a 100 percent
achievement level. According to the Agency, this dispute
arose in the context of negotiations over the timing of
future pay adjustments in the CNPO bargaining unit under
the negotiated Pay Banding System.

The Agency asserts that, under Authority precedent,
proposals that attempt to establish the level of
performance required to achieve a particular rating
interfere with management's rights to direct employees
and assign work and are nonnegotiable. The Agency
contends that the disputed portions of this provision
establish "specific ranges of a standard that will match
a specific performance rating." Statement of Position at
4. The Agency argues that the fact that the ranges set
forth in the provision are currently established by the
Agency does not render the provision negotiable. In this
regard, the Agency contends that the provision would
restrict it from altering those ranges during the life of
the agreement and, consequently, interferes with its
management rights to direct employees and assign work
under section 7106(a)(2)(A) and (B) of the Statute.

The Union describes the Pay Banding System as an
alternative method of pay that has no step increases
based on length of service. The Union states that the
intent of this provision is to provide a replacement for
step increases. The Union asserts that under the
provision the parties agree to link pay increases to
performance based on performance level ranges established
by the Agency. The Union contends that the parties are
not attempting to establish the level of performance
necessary to achieve a particular rating but are setting
forth the levels of performance that will merit pay
increases. The Union states that, under the provision,
the Agency is free to change the levels of performance
for rating purposes, but, if it does so, the result will
be "one set of standards for performance evaluation and
one set of standards for pay increases." Reply Brief at
3.

B. Analysis and Conclusions

Initially, we note that this provision applies to
nonappropriated fund employees who are not covered by
chapter 43 of title 5, which relates to performance
appraisal. See, for example, American Federation of
Government Employees, AFL-CIO, Local 987 and
Headquarters, Warner Robins Air Force Logistics Command,
Robins Air Force Base, Georgia, 8 FLRA 667, 676 (1982)
enforcement denied as to other matters sub nom.United
States Air Force, Headquarters, Warner Robins Air Force
Logistics Command, Robins Air Force Base, Georgia v.
FLRA, 727 F.2d 1502 (11th Cir. 1984). Thus, unlike the
performance standards involved in much of Authority
precedent, the performance levels involved in this
provision are not governed by chapter 43. However, in
our view the establishment of performance levels for
nonappropriated fund employees has the same purpose as
the establishment of performance standards for employees
who are covered by chapter 43. That is: they "establish
the level of output that is to be achieved." National
Treasury Employees Union v. Federal Labor Relations
Authority, 691 F.2d 553, 563 (1982).

It is well established that management's rights to
direct employees and assign work include the rights to
determine the quantity, quality, and timeliness of
employees' work products and to establish employees' work
priorities. For example, Patent Office Professional
Association and Patent and Trademark Office, Department
of Commerce, 25 FLRA 384, 385-86 (1987), affirmed mem.
sub nom.Patent Office Professional Association v. FLRA,
No. 87-1135 (D.C. Cir. March 30, 1988) (per curiam).
Those rights extend to the establishment of job
requirements in the form of productivity or performance
standards that serve as the basis for encouraging and
rewarding successful performance and discouraging and
remedying performance that is unacceptable. See, for
example, American Federation of State, County and
Municipal Employees, AFL-CIO, Council 26 and U.S.
Department of Justice, 13 FLRA 578 (1984). In this
regard, an essential aspect of management's assignment of
work and direction of employees is the establishment of
job requirements for various levels of performance in
order to achieve the quality and amount of work needed
from employees to effectively and efficiently fulfill the
agency's mission and functions. Id. Thus, management's
rights to direct employees and assign work include the
establishment of the productivity requirements that
employees must attain for their performance to meet
acceptable or superior levels for purposes of avoiding
punitive action or receiving a reward.

We emphasize that these rights do not extend to
determining the rewards given for successful or superior
performance. SeeNational Treasury Employees Union and
Internal Revenue Service, Indianapolis District, 30 FLRA
1170 (1988) (IRS, Indianapolis); National Treasury
Employees Union and Internal Revenue Service, 27 FLRA 132
(1987). A proposal requiring that awards be granted for
particular performance does not directly interfere with
management's rights to direct employees and assign work
if it leaves the establishment of the performance
standards used to determine eligibility for awards to the
agency's discretion. SeeIRS, Indianapolis, 30 FLRA at
1172. Unlike the establishment of productivity
requirements, the determination of what rewards will be
given for meeting or exceeding those requirements does
not establish the level of output that is to be achieved
and, consequently, is not directly related to the
direction of and assignment of work to employees.

Sections a. and b. of Provision 1 set forth
production standards that employees must meet in order
for their performance to be considered satisfactory or
better. Consequently, for the reasons set forth above,
the disputed portion of Provision 1 directly interferes
with management's rights to direct employees and assign
work. The fact that sections a. and b. reflect the
performance levels that have been established by the
Agency does not, by itself, make the provision
negotiable. To the extent that the Agency's policy
constitutes, and results from, the exercise of management
rights under section 7106 of the Statute, provisions
incorporating that policy constitute an independent
contractual limitation on management's rights and
directly interfere with the relevant right or rights.
For example, American Federation of Government Employees,
National Border Patrol Council and National Immigration
and Naturalization Service Council and U.S. Department of
Justice, Immigration and Naturalization Service, 40 FLRA
521, 527 (1991), petition for review filed as to other matters sub nom.U.S. Department of Justice, Immigration
and Naturalization Service v. FLRA, No. 91-4525 (5th Cir.
June 25, 1991). In this case, the Union states that
while, under the provision, the Agency could adopt
different standards for purposes other than determining
eligibility for pay increases, it would be bound by the
standards contained in the contractual provision for
purposes of determining eligibility for pay increases.
As we discussed above, management's right to direct
employees and assign work extends to establishing
production requirements and standards for purposes of
eligibility for rewards that are based on the performance
of work. Consequently, by limiting the Agency's ability
to alter the standards that apply for purposes of pay
increases, the provision directly interferes with
management's rights to direct employees and assign work
under section 7106(a) of the Statute.

As there is no claim that sections a. and b.
constitute an appropriate arrangement for employees who
are adversely affected by the exercise of management's
rights, we will not analyze this provision to determine
whether it is negotiable under section 7106(b)(3)
notwithstanding its direct interference with management's
rights. Based on the foregoing, we conclude that the
disputed portion of Provision 1 is nonnegotiable.

III. Provision 2

DURATION:

This agreement will be effective 10 Dec 91 and will
remain in effect until superseded by renegotiation
of formal contract.

A. The Positions of the Parties

The Agency states that the plain wording of this
provision specifically makes the agreement effective on a
date prior to the date of signature by the parties. The
Agency asserts that this provision does not reflect the
Union's stated intent that this provision merely seeks to
give retroactive effect to the terms of the agreement
upon approval by the Agency head. The Agency contends
that this provision is inconsistent with section 7114(c)
of the Statute because it establishes an effective date
other than the date of approval by the Agency head or the
31st day after execution.

The Union describes this provision as intended to
"retroactively effect the Agreement upon approval or
expiration of the review period." Petition at 1-2. The
Union states that the purpose of the retroactive
effective date was to ensure that employees would receive
an upcoming cost of living increase and to discontinue a
provision on gain sharing. The Union contends that both
parties recognized that the agreement was subject to
Agency head review pursuant to section 7114(c) of the
Statute as was evidenced by the fact that the agreement
was forwarded for review. The Union asserts that nothing
in the Statute prevents parties from giving retroactive
effect to an agreement upon review by the head of the
agency or expiration of the 30-day review period.

B. Analysis and Conclusions

Initially, we note that the agreement to which this
provision applies is of limited scope. In addition to
this provision, the agreement consists of six sections,
all of which relate to matters concerning the Agency's
Pay Banding System. Four of these sections are set forth
in conjunction with Provision 1 above. The Union
contends that Provision 2 is intended to give retroactive
effect to the provisions of the agreement and is not
intended to circumvent the agency-head review process
that is required by section 7114(c) of the Statute. The
Agency argues that the wording of the provision does not
reflect this intent. We find that the Union's statement
of intent is consistent with